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Pattie's Event Planning Service records prepaid expenses as expenses when cash is paid out, and records unearned revenues as revenues when cash is collected. She then makes adjusting entries as needed to bring her books up to the full accrual basis once a year at the end of the year. This year on December 15, she collected $1,000 from a customer in advance for a series of events that will start in late December and finish in mid-March. At the end of the year, she has finished approximately 10% of the services for her customer. Her adjusting entry at December 31 will include a debit to Service revenue of $900.

A) True
B) False

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Real Losers, a diet magazine, collected $360,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What adjusting entry is needed at June 30? Real Losers, a diet magazine, collected $360,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What adjusting entry is needed at June 30?

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A business pays its employees' monthly salaries of $20,000, half on the 15th day of each month, and half on the first day of the following month. On October 31, the business accrued salaries for the second half of October. On November 1, the business paid their employees $10,000 for the second half of October. Please provide the journal entry for the payment made on November 1. A business pays its employees' monthly salaries of $20,000, half on the 15<sup>th</sup> day of each month, and half on the first day of the following month. On October 31, the business accrued salaries for the second half of October. On November 1, the business paid their employees $10,000 for the second half of October. Please provide the journal entry for the payment made on November 1.

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Which of the following accounts would NOT be included in the adjusting entries made at the end of an accounting period?


A) Accounts receivable
B) Accounts payable
C) Cash
D) Prepaid insurance

E) C) and D)
F) A) and B)

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Classic Artists' Services has hired a maintenance man to maintain a building they use for instruction. He will begin work on February 1 and work through till May 31. They will pay the maintenance man $2,000 at the end of May. Classic Artists' Services accrue Maintenance expense at the end of every month. What is the balance in the Accounts payable account for amounts owed to the maintenance man at the end of March?


A) Debit balance of $2,000
B) Credit balance of $1,000
C) Debit balance of $1,000
D) Credit balance of $2,000

E) B) and C)
F) A) and D)

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How do the adjusting entries differ from other journal entries?


A) Adjusting entries always include debits or credits to at least one income statement account and at least one balance sheet account.
B) Adjusting entries are made only at the end of the period.
C) Adjusting entries never affect cash.
D) All of the above are true.

E) B) and D)
F) All of the above

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Adjusting entries NEVER involve:


A) expenses.
B) cash.
C) liabilities.
D) revenues.

E) B) and C)
F) A) and D)

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Employees of Robert Rogers, CPA worked during the last two weeks of December. They received their paychecks on January 2. The matching principle would require that which of the following accounts appear on the balance sheet for December 31?


A) Accounts payable
B) Salaries payable
C) Salary expense
D) Prepaid expense

E) B) and D)
F) None of the above

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At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is one of the effects of this error?


A) Net income is overstated.
B) Liabilities are overstated.
C) Net income is understated.
D) Expenses are overstated.

E) A) and B)
F) A) and C)

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The table below represents Able Company's supplies account. Please supply the missing amount. The table below represents Able Company's supplies account. Please supply the missing amount. A) $9,000 B) $1,000 C) $3,000 D) $11,000


A) $9,000
B) $1,000
C) $3,000
D) $11,000

E) A) and D)
F) B) and D)

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The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following is TRUE?


A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.

E) C) and D)
F) All of the above

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The financial statements should be prepared in this order: 1)income statement, 2)balance sheet, and 3)owner's equity.

A) True
B) False

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The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3,000 of unearned service revenue that has now been earned. Which of the following is TRUE?


A) Total revenue is overstated.
B) Total revenue is understated.
C) Total expenses are overstated.
D) Total expenses are understated.

E) A) and B)
F) B) and D)

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Generally accepted accounting principles require the use of accrual accounting.

A) True
B) False

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The accountant for Duman Legal Services failed to make an adjusting entry for supplies that had been used for the year. Which of the following is TRUE?


A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.

E) None of the above
F) B) and D)

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Hank's Tax Planning Service has the following plant assets: Hank's Tax Planning Service has the following plant assets: Hank's monthly depreciation entry will include a: A)debit to depreciation expense of $210. B)credit to depreciation expense of $370. C)debit to Accumulated Depreciation of $210. D)credit to Accumulated Depreciation of $370. Hank's monthly depreciation entry will include a: A)debit to depreciation expense of $210. B)credit to depreciation expense of $370. C)debit to Accumulated Depreciation of $210. D)credit to Accumulated Depreciation of $370.

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On December 31, 2012, the adjusting entry for depreciation was made incorrectly. The following is the entry which was made erroneously: On December 31, 2012, the adjusting entry for depreciation was made incorrectly. The following is the entry which was made erroneously: The correct amount of depreciation should have been $5,100. Consider the effects of this error on the balance sheet, and identify which of the following statements is TRUE. A) Total liabilities are overstated by $3,600. B) Total liabilities are understated by $3,600. C) Total assets are overstated by $3,600. D) Total assets are understated by $3,600. The correct amount of depreciation should have been $5,100. Consider the effects of this error on the balance sheet, and identify which of the following statements is TRUE.


A) Total liabilities are overstated by $3,600.
B) Total liabilities are understated by $3,600.
C) Total assets are overstated by $3,600.
D) Total assets are understated by $3,600.

E) B) and C)
F) A) and B)

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The accountant for Hobson Electrical Repair Company failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following is TRUE?


A) Total liabilities are overstated.
B) Total liabilities are understated.
C) Total assets are overstated.
D) Total assets are understated.

E) B) and C)
F) All of the above

Correct Answer

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On September 1, 2011, Joy Company paid $4,000 in advance for an 8-month rental space covering the period of September, 2011 through April, 2012. The business makes adjusting entries once a year at year-end. The adjusting entry at December 31, 2011 would include a:


A) debit of $4,000 to Prepaid rent expense on December 31, 2011.
B) debit of $2,000 to Prepaid rent expense on December 31, 2011.
C) debit of $2,000 to Rent expense on December 31, 2011.
D) credit of $2,000 to Rent expense on December 31, 2011.

E) All of the above
F) B) and D)

Correct Answer

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Real Losers, a diet magazine, collected $360,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the balance in the Unearned revenue account at the end of December?


A) $150,000
B) $330,000
C) $360,000
D) $0

E) None of the above
F) A) and C)

Correct Answer

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